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The Health Insurers' Faustian Bargain
In early 2009, health insurance companies struck a Faustian bargain with the Obama administration. In exchange for a law requiring Americans to purchase health insurance, they agreed to regulations requiring them to offer coverage to all comers regardless of preexisting illnesses. Now that ObamaCare is law, insurers are learning that they may have sold their souls to the Devil -- along with the lives of the American people.

At first glance, ObamaCare might seem a good deal for insurance companies by guaranteeing them a market for their services. But this guaranteed market comes at a steep price, with the government dictating whom insurers must cover, what benefits they must offer, and what prices they may charge.

Mandatory insurance will inevitably raise insurers' costs. Under any system of mandatory insurance, the government must necessarily determine what constitutes an "acceptable" policy. This creates a giant magnet for special interest groups seeking to include their favorite benefit in the mandatory package....

...Implemented nationally, ObamaCare could drive many insurers out of business altogether. In essence, private insurers would survive only at the arbitrary pleasure of the government. And the bureaucrats' whims can be arbitrary indeed.

When insurers recently pointed out that ObamaCare did not actually require them to immediately offer coverage for certain children with preexisting conditions, Secretary of Health and Human Services Kathleen Sebelius immediately threatened to issue regulations forcing them to do so -- regardless of the actual letter of the law.

And Congress is now seeking to expand the newly-passed ObamaCare legislation to give federal regulators the same power as Massachusetts state regulators to veto proposed insurance rate increases unless federal officials considered them "reasonable."

ObamaCare thus places a noose around private insurers' necks. Insurance companies will be required to offer numerous benefits determined by politicians and lobbyists. But they will be allowed to charge only what government bureaucrats permit. No business can survive long if it must offer $2,000 worth of services to customers but can charge only $1,000.

Although it is tempting to take delight at the insurance industry's self-caused plight, the inevitable collapse of the private insurance market would also leave millions of Americans without coverage. Even though this crisis would be caused by government policies, liberals would gleefully portray it as a "failure of the free market" and demand that the government "rescue" health care. The end result would be a "single payer" socialized medical system like Canada's or Great Britain's, with rationing and long waits for medical care....